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Early 2020s Recession
The recession of the late 2010s describes the period of economic downturn affecting much of the world in the late 2010s. The global recession spread around other places around the world as early as late 2019 but came to American markets several months after the Black Monday of August 2020, resulting from a stock collapse of unprecedented size which saw the Dow Jones Industrial Average fall by 21.1%. This collapse, larger than the stock market crash of 2008, was handled effectively by the global economy, and the stock market began to quickly recover. However, in North America, the sluggish recovering in wages saw a sharp decline in effective demand and debt repayments which eventually led to a personal debt crisis which compromised the well-being of millions of Americans. The following recession thus impacted the many countries closely linked to the United States. Background From 2016-2019, the economy steadily grew to record levels, but income inequality continued to worsen as a result of diminishing effective demand and over-saturation in specific economic sectors. Measurable changes in GDP growth began to emerge in the first quarter of 2017, however, overall growth remained positive. An early fore shock of the crisis came between February 2 and 5, 2018 when the Dow Jones fell by more than 5% in a two day period, its worst drop since the crash of 2008. The market rallied shortly after this correction, but growth noticeably slowed and became less stable. Investors continued to seek long term treasury bonds as opposed to riskier short term investments, leading to a flattening yield curve that forced the Federal Reserve to raise rates to 2.2% by the end of Summer in an attempt to reduce inflation. However, as interest rates grew, and inflation fell, consumer buying power fell far more noticeably and debt repayments contracted, which in turn led to a swing of defaults on several non-performing loan sectors. The immediate cause of the recession was a loss of consumer and business confidence as a result of the 2019 Auto Loan Crash, coupled with an already lethargic middle-class. The Auto Loan Crash in turn led to a much more severe crash in the Student Loan sector, and non-performing loans worldwide ultimately devastated financial markets. Many economists blame the hike in interest rates in October of 2018 as the event that immediately precipitated the recession. Government response Two weeks after the Auto-Loan bubble burst, the Federal reserve attempted to increase consumer spending by lowering interest rates, however this did little to spike growth as the credit worthiness of many Americans had been wiped out. The Trump administration, already dealing with the investigation by Robert Mueller and the fast approaching Republican Primary made few substantive attempts to stimulate economic growth, claiming that the US economy was fundamentally strong, and the severity of the recession was being exaggerated by the media. Effects 2020 marked the end of what was at the time the longest peacetime economic expansion since the Dot Com Boom. Prior to the onset of the late 2010s recession, the United States enjoyed steady job growth and a declining unemployment rate, with wages finally beginning to rise after more than a decade in stagnation. The Labor Department estimates that as a result of the recession, the economy shed 2.4% of non-farm payrolls. The bulk of these losses were in services and manufacturing. Among the hardest hit regions were the Mid-western states and the west coast, while New England and the South were less affected. There is some dispute about the actual health of the economy prior to the recession as a growing number of Americans were either employed in low quality "Gig Economy" jobs, or had left the labor force outright, leading to overly optimistic employment figures that actually continued through the recession. The slow recovering of wages in the US compounded the countries existing high savings rate, and further diminished effective demand. This had a severe impact on commodity exports, which were already struggling in a lethargic pre-recession economy. During the recession, the world saw a decline in over 100 billion-USD in exports to the US over an 11 month period, largely in electronics and low-cost manufactured goods. While this hobbled attempts by the Trump administration to restore American manufacturing, it sent the economies of major exporters, particularly China and Germany into far more severe recessions. Reduced demand for energy also put strains on the oil industry and energy exporters like Russia, Venezuela, and Saudi Arabia; along with the US domestic oil and gas industries. For Germany, the decline in the US demand for exported commodities combined with the UK's exit from the EU sent German commodities futures into a free fall. With 47% of the country's GDP coming from exports, this crash resulted in the worst economic collapse in German history since the Great Depression. Unemployment rose above 15% by 2021, and the collapse of the country's financial sector impacted the whole of the European economy's sovereign debt crisis. The crash resulted in many private banks issuing higher repayment rates on student loans to make up for lost revenue. As most graduates were unable to pay back these debts, most simply chose to default. This compounded the crisis as banks were unable to recoup the losses on non-performing loans. Many foreign banks saw a similar default patter emerge as they attempted to recover capital from non-performing loans in other sectors. Political ramifications Belated recovery from the 2020 recession contributed to Cory Booker's victory in the 2020 presidential election, during which Booker was successful in attributing slow economic growth to incumbent president Donald Trump. Trump's economic policies were effectively portrayed as having destabilized the global economic system, doing more to harm low-income workers than help. As his appeal to low-income, rural and industrial white voters was key to Trump's entire appeal, the recession was widely perceived as either a betrayal or left many of his supporters feeling hopeless about their futures. As such, the election of 2020 saw the Democrats take back both houses of Congress and a majority of state legislatures and/or governorships, along with the Presidency. In Germany, slow economic growth hobbled the Christian Democrats path to victory, with the SPD gaining control of the presidency, while Angela Merkel was elected to a 4th term as Chancellor by a considerably more narrow margin compared to prior elections, with the AfD seeing a late surge in support. Across Europe, the Recession's impact on the Sovereign Debt Crisis grew support for rising nationalist/Euroskeptic parties, along with several secessionist movements. Italy and Greece both held referendums to leave the EU. Greece's exit saw near unanimous support for exit, while Italy was sharply divided by the vote, with the southern half of the country (save for Rome) voting for exit and the North voting for remain. In China, the recession saw the Communist Party clamp down on civil liberties and shift more power from the market to the state, which would define the economic climate of the Lost Decade. Xi Jinping would consolidate power to secure a second term with minimal opposition, and pushed for even harsher "anti-corruption campaigns" (CCP purges) and a wealth redistribution effort to calm the populace and prevent political upheaval at the cost of economic growth. Russia's economy saw its GDP contract by 5% with the drop off in demand for oil and natural gas. Russia had made several moves in 2017-18 to exploit political instability in the West, but with the onset of the recession its treasury could no longer support its badly overextended military on its western borders, thus forcing it to look inward. Inflation rose to 35% against the dollar by late 2020. Influence on culture In the United States during the recession, Millennials began to abandon credit as they defaulted on their student loans, choosing to absorb bad credit rather than pay down debt they couldn't afford. This resulted in a decline in home and auto-loans as younger Americans began relying more on ride-share services and apartment rentals. The decline in home ownership from the recession was a major contributing factor to the Housing Market Crash of 2027 and further impacted American culture as suburban housing declined as a result in favor of high-density apartments and smaller homes. Car companies also began to make smaller, more affordable cars for individuals with poor credit, relying on self-driving technologies and spartan design to reduce costs. The drop in effective demand and rising wages in countries that produced low-cost commodities lead to a 30% reduction in sales for retail chains. This resulted in nation-wide closures of retail outlets that were pillars of most malls, which in turn led to a closure of malls as shopping centers (the Mall saw a resurgence in the following years as real-estate tycoons like Cheyene Bennings converted former retail space into microapartments and business centers in rural areas). This caused more people to shop through services like Amazon and Craigslist for material goods and groceries, giving rise to automated delivery systems. Many automotive workers in the Midwest moved to Nevada, Texas or the South where manufacturing jobs were still growing. Civil unrest In Germany, there was a significant wave of rioting at the height of the recession in 2019 and 2020, with unemployment, social discontent, and anti-globalism being seen as major factors. Areas affected included Westend-Süd district in Frankfurt, Berlin, Bonn, Dusseldorf, and Heidelberg. Similar instances of civil unrest were seen in southern China, Italy, Greece, and western India. In the US longstanding political divisions were deepened by the economic crash and the country began to see the emergence of militant groups on the left and the right who blamed the political and financial elites for the decline of the American middle class. The election of 2020 saw widespread protests, rioting, and a growing number of militia groups from the Alt-Right, neo-Communists, neo-Nazi and neo-Confederate groups, Anarcho-Syndicalists, fringe elements of minority rights groups, and various separatist groups. Category:21st Century Category:21st-century economic history